National Energy Policy -or- National Energy Politico Policy with Price Distortion Benefiting the Politico?

Each and every time energy prices increase to the point that consumers are upset about the price of energy (generally gasoline prices) the mantra is repeated of “why don’t we have a national energy policy!”. As the argument goes, we have had 40 some years to come up with policy yet we have no policy. Nay, nay! The US does have a national energy policy. Better stated, the US does have a national energy politico policy.


The US energy politico policy is based upon the vision of do-gooders combined with artificial pricing that purposefully, through politicos through the mechanism of government, suffers from just about every phenomena pointed out by public choice theory. Or more succinctly:


I think the government solution to a problem is usually as bad as the problem and very often makes the problem worse. - Milton Friedman


US energy policy is foremost driven by go-gooders also known as environmentalists. Their intentions are worthy but they suffer from the idea that categorical risk management trumps real world, real-time, real flesh and blood people that face trade-offs resulting in real world incremental risk management.

The next part of the US energy policy is artificial pricing. Alternative energy programs are uncompetitive at price point (P) hence taxpayer subsidy (s) is introduced to make the make prices  more competitive resulting in price P(s) which is artificial. Artificial to the tune of billions of taxpayer dollars every year, year in and year out.

The combination of unrealistic categorical risk management advocated by the do-gooders and P(s) then becomes the multi-billion dollar conduit for:

(1) dependent political consistency building exercises by politicos of a group of go-gooders through taxpayer dollars,

(2) the do-gooders worthy intentions, as always, are hijacked by a set of crony capitalists in search of taxpayer dollars as a substitute for competition [rent seeking],

(3) the rent seeking causing taxpayer dollars to be funneled into a myriad of uncompetitive items represented by P(s). These uncompetitive items act as a mirage for the do-gooders and mainly as dependent political consistency building exercises by politicos of the crony capitalist.

Meanwhile, back in the real world economy of real flesh and blood people, price (P) regarding energy escalates. James and Jane Goodfellow then complain about price (P). The complaint surrounding price (P) is that price should not be so high and hence where is the energy policy that would have stopped such as escalation in price?

The basic problem with the Goodfellow’s complaint is that price (P) is not functioning. In a world of scarce resources with alternate uses, the rationing agent is price. Price, in other words, functions in a world of trade-offs none of which are related to categorical risk management. Hence the result is that price is distorted and we arrive at the Goodfellow’s complaint about price.

One might say that energy prices, specifically gasoline, is not a price phenomena as much as a distorted price phenomena due to national energy politico policy with distortions in price benefiting the policy purveyors, that being the politico.

Capital Investment and the Production Possibilities Frontier

Production Possibilities Frontier

Note: the first 11 seconds of the video appear blank as the instructor has not begun writing on the chalkboard.

Upon Further Review: ‘Employment’ is Currently 5 Million Persons Less Than Pre-Recession Peak.

“As the most widely reported rate of unemployment (U-3) has fallen in recent months, people with a political agenda served by painting a rosy picture of the recovery have made considerable noise about this decrease. Their political opponents have responded that one reason for the decline is that the labor force has fallen as more people have given up looking for work, some of them going into retirement sooner than they would have if the labor market had been more robust.

The best way to avoid the parsing and cherry-picking that plague such debates is to look not at unemployment, but at employment. After all, it’s employment that contributes to the production of goods and services and generates earnings for the job holders. Employment is less subject to interpretive ambiguity than unemployment is.

The most recently reported data on private nonfarm employment, for January 2012, show that employment has indeed continued its recovery. Since reaching its current-recession trough about two years ago, it has increased by about 3 million persons. Before starting a celebration, however, we should recognize that private nonfarm employment is still about 5 million persons less than it was at its pre-recession peak in 2008.” - Private Employment Has Recouped Only Three-Eighths of Its Recent Loss, Robert Higgs, 02/19/2012

Link to the entire article appears below:

http://blog.independent.org/2012/02/19/private-employment-has-recouped-only-three-eighths-of-its-recent-loss/

Rising Gasoline Prices, The Tipping Point, and the Political Anger Factor

An item worthy of examination is the political anger factor regarding the gasoline price tipping point. The tipping point being the price per gallon of gasoline that causes consumer expectations to plummet, causes a drastic cut back in driving and consumer purchases.

The Political Anger Factor and the Political Anger Factor Regarding High Persistent Unemployment

The political anger factor is a wide spread resentment by the electorate directed at an incumbent. In political economy a common example of the political anger factor is persistent high unemployment, especially when unemployment approaches 10%, the political anger factor [the summation of the electorate's anger] is exposed and rises exponentially and this exponential level of anger is directed toward the incumbent.

The 10% figure of high persistent unemployment in the traditional political anger factor proposition is merely an observation of averages. That is, future data may point to 8% or 11% as the point that the political anger factor regarding unemployment goes exponential. Further, those unfamiliar with political science or political economy likely have no earthly idea about the political anger factor proposition. They notice more anger but have not studied the trend. That is, the knowledge is not widely disseminated.


The Political Anger Factor Regarding Gasoline Prices

The “tipping point” in gasoline prices, on the other hand, becomes a “chosen” line of demarcation by pundits, media types and talking heads and much less a historical trend or historical average. That is, the chosen number is more notional and much less finding its roots in historical underpinnings. One might say the chosen number has political aspect more than empirical aspects. Hence the average Goodfellow uses the number they see in the media as the actual number or at least the subject number regarding tipping point. One might call it the “headline tipping point”.

This particular point of demarcation aka tipping point is knowledge wide spread albeit the tipping price number may be incorrectly pegged. James and Jane Goodfellow, if interviewed, will many times recite the very “headline tipping point” offered through media. Stated alternatively, headline tipping point becomes a buzz number and the buzz conversation. It may even trump small talk about the weather.

Hence we have a number “chosen”, we have widespread knowledge of the supposed correct number of the tipping point, and now we have “measurement“. One merely looks to the gas station marquee sign for “price” and one watches the price go up on every gas station one passes. One might say immediate feed back is everywhere.

A final point to examine is the number exposure units. Consider the political anger of the 90% employed vs. the 10% unemployed (from the example above). Exactly how politically angry is one if one is part of the 90% employed? Yes, there is the “what if I’m next” factor, and the “business would be better if unemployment where lower” factor, but if one is employed, exactly how outright angry does one get? More like a boiling resentment than outright anger. What about gasoline? Lets try +/- 90% are effected by rising gasoline prices. Boiling resentment becomes outright anger.

Which begs the question: if an incumbent has high persistent unemployment just below the exponential line i.e. 10% and simultaneously experiences rising gasoline prices approaching a tipping point, exactly what level of political anger ensues?

　

　

　

　

　

　

　

　

　

　

　

　

　

Examining the Argument Basis for the Continuation of Economic Development Authorities

State, local and municipal economic development authorities based on collective action and funded by taxpayer dollars come in many varieties. In the main one might categorize the central planning entities as:

(1)    those based on central planning techniques regarding urban planning,

(2)    those based on central planning techniques that attempt to attract private or public sector entities via industrial parks or site preparation,

(3)    those central planning techniques awarding tax holidays, subsidized loans and grants-in-aid to attract firms.


The three central planning techniques mentioned above have been challenged as non-effective and unrealistic based upon the position that the private sector will respond if a demand exists [let the market determine]. That is, the spontaneous/emergent order of the plans of the many will be more effective than the central plans of the few. (1)

One of the rebuttals to the argument that economic development plans are ineffective is:  “…others are providing central planning and collective action taxpayer dollar incentives hence one must compete with the other state, local and municipal governments”. That is, the basic debate point of “if they are doing it, we must do it too”.

Drilling down into the rebuttal’s debate point of “….since others offer taxpayer dollars, than we must offer too…” what if the debate point is a signal to consider/investigate the implicit assumption of “if they, then we” and that this aspect of the rebuttal in fact points directly to the summation of components of public choice theory? How so?  

If collective action by use of taxpayer dollars begets another set of collective action through another set of taxpayer dollars, and so on down the line, as argued in the above debate point, then the debate point boils down to  “perpetual” [if they, then we, and we become the next they, and so on]. However, is the underlying basis for the debate point a signal of “purposely perpetual”? Stated alternatively, is "if we, then they" no more than an exercise of purposeful perpetuation, which is a reflection of, and indication of, a purposeful spider web of rent seeking, special interests, politico enablers, and political constituency building through taxpayer dollars?  

Hence the rebuttal is merely based upon perpetuation which then leads one to consider the rebuttal as an indicator of a purposeful perpetuation of a pre-built network of rent seeking. That state, local and municipal authorities that argue they must offer taxpayer dollars in the form of economic development as an exogenous set of state, local and municipal authorities are offering taxpayer dollars in the form of economic development, is not an argument of the exogenous rather an indicator of a scheme of purposeful perpetuation.

One might consider taking the above proposition of a purposeful perpetuating scheme and putting it into “action”:

(1)    local economic development authority X is directed by politico enablers Y and made up of economic development authority employee group G, the summation of which is dispensing taxpayer dollars T.

(2)    one knows as a fact that anytime T is dispensed activities as evidenced by public choice theory emerge i.e. rent seeking, special interests, politicos acting as special interest enablers, crony capitalism, etc. That is, a special group is benefiting from the associated rent seeking and we will designate this group as RS.

(3)  the economic development authority X is necessarily  perpetuated as both Y and G have a vested interest in employment and power, respectively, and RS has an interest in the taxpayer dollars bestowed upon RS.

(4)  in order to legitimize and perpetuate the existence of X the group Y, G and RS merely point to the existence of another local economic development authority designated as A.

(5)therefore, as the argument goes, since A exists then X must exist and since X exists then A must exist.

However, both X, A and the multitude of other local economic development authorities B, C, D and so on do not exist because of one another. However, they may well exist as an emergent coordinated scheme. That is, once the multitude of local economic development authorities came into existence, then Y, G, and RS associated with each individual authority have a grand incentive to perpetuate their internal employment, politico external power and rent seeking activities of the taxpayer dollar. Their self-preservation then becomes a coordinated scheme of existence due to/based upon their own and other's emergence over time. The self-perpetuation of such authorities then becomes: since X emerged, and A emerged, then B, C, D and so on must exist due to the emergence of others. However, their existence is not due to greater emergence, their existence is due to their internal employment, politico external power and consequential rent seeking activities of the taxpayer dollar.

Which then leads one back to the proposition: it is not an argument of the exogenous rather an indicator of a scheme of purposeful perpetuation. That the separate authorities merely find themselves in a collection of authorities and conveniently point to the other authorities as the basis for their continued existence. That the convenience of other authorities as a basis regarding each seperate authority’s existence is fallacious. That the convenience of other authorities is more likely the knowledge that political power, rent seeking activities and internal employment of the authorities themselves can be perpetuated, in a coordinated sense, by each authority purposefully pointing the other authority as a basis for existence.

Notes:

(1) The Use of Knowledge in Society, 1945, F.A. Hayek.

http://www.econlib.org/library/Essays/hykKnw1.html

43,000 K-12 Schools Labeled as Low or Underachieving

Whatever one’s political point of view is regarding the bipartisan supported and consequential legislation known as “No Child Left Behind”, the one interesting yield of the legislation is an abundance of data produced. “The Testing triggered by the law, however, helped researchers gather an abundance of data on student progress in annual math and reading exams”. (1)

Apparently, data regarding K-12 educational scores were tremendously difficult to obtain before the data now available as a consequence of No Child Left Behind. “Erich Hanushek, an economist at the conservative Hoover Institute, said that 40 years ago he toiled in school districts gathering test data. By the mid-2000s, research on teacher effectiveness trickled out, but No Child Left Behind opened the floodgates”. (2)

With data now in hand, The Center of Education Policy estimates 43,000 (48%) of US schools are now low or underachieving as defined by No Child Left Behind. (3) (4)

The statistic above begs a question: the 48% low or underachieving schools, given a 300% real dollar increasing in spending on education is the US since 1960, means what? Many people state that more money does not solve the problem. Fair enough observation. However, regarding the spending and the miserable results one needs to examine the further question of: Where did the money go? If the 300% increase in spending did not yield output improvement, the resources merely disappeared and evaporated into thin air? –Or- the money/resources was absorbed by the participants of the delivery model and not delivered to the end consumer which is the student/child.

The mantra of more spending yielded stagnant or even declining results misses the point that the resources were allocated elsewhere. Was the money returned to the taxpayer? A check was written to each student? No, the money ended in the delivery model.

Regardless of the zeal to put educators on a pedestal as “those teaching the citizens of the future” and the like, one needs to look beyond the drama and romance of politically framed redirect arguments and look at the hard cold facts of educator total compensation and education administration expansion and accelerated compensation. One needs to examine the infrastructure spending and crony capitalism there associated.

The question/observation then becomes: if spending has increased by 300% in real dollars since 1960; student test scores are level or declining; school system administrators regularly making six figure incomes and six figure retirement incomes while teacher pay, benefits and retirement have escalated as well; with school building construction continuing at always ever increasing and over-run costs….then one has in fact been shown the money. That a late stage collectivist based model delivered through monopoly has merely done what it’s destined to do in its late stages: increased inputs yields no increase in output and the power purveyors of the model marginally reward underlying participants while rewarding themselves handsomely - all the while shirk increasing at an increasing rate. (5)


Notes:

(1)  School Law Earns One Credit: derided ‘No Child’ initiative forms basis for broad changes in educational system, Stephanie Banchero, The Wall Street Journal, 02/09/2012. http://online.wsj.com/article/SB10001424052970203315804577209773654799182.html

(2) Ibid.

(3) Ibid.

(4) AYP Results for 2010-11, Center for Education Policy,  http://www.cep-dc.org/displayDocument.cfm?DocumentID=386

(5) From Economic Man to Economic System, Harold Demsetz, 2008, Cambridge University Press.

Pendulum Waves

"What it shows: Fifteen uncoupled simple pendulums of monotonically increasing lengths dance together to produce visual traveling waves, standing waves, beating, and random motion. One might call this kinetic art and the choreography of the dance of the pendulums is stunning! Aliasing and quantum revival can also be shown.

How it works: The period of one complete cycle of the dance is 60 seconds. The length of the longest pendulum has been adjusted so that it executes 51 oscillations in this 60 second period. The length of each successive shorter pendulum is carefully adjusted so that it executes one additional oscillation in this period. Thus, the 15th pendulum (shortest) undergoes 65 oscillations. When all 15 pendulums are started together, they quickly fall out of sync—their relative phases continuously change because of their different periods of oscillation. However, after 60 seconds they will all have executed an integral number of oscillations and be back in sync again at that instant, ready to repeat the dance." - Simple Harmonic (and non-harmonic) Motion, Harvard Natural Sciences Lecture Demonstrations 

Link to entire article: http://sciencedemonstrations.fas.harvard.edu/icb/icb.do?keyword=k16940&pageid=icb.page80863&pageContentId=icb.pagecontent341734&state=maximize&view=view.do&viewParam_name=indepth.html#a_icb_pagecontent341734

Chuck Woolery on Term Limits

About Those Taxpayer Subsidies for Green Energy: Germany and the Dutch Pull the Plug

“COPENHAGEN – One of the world’s biggest green-energy public-policy experiments is coming to a bitter end in Germany, with important lessons for policymakers elsewhere.

Germany once prided itself on being the “photovoltaic world champion”, doling out generous subsidies – totalling more than $130 billion, according to research from Germany’s Ruhr University – to citizens to invest in solar energy. But now the German government is vowing to cut the subsidies sooner than planned, and to phase out support over the next five years. What went wrong?

There is a fundamental problem with subsidizing inefficient green technology: it is affordable only if it is done in tiny, tokenistic amounts. Using the government’s generous subsidies, Germans installed 7.5 gigawatts of photovoltaic (PV) capacity last year, more than double what the government had deemed “acceptable.” It is estimated that this increase alone will lead to a $260 hike in the average consumer’s annual power bill.” – Germany’s Sunshine Daydream, Project Syndicate, Bjørn Lomborg (1)

“The nation known for its iconic windmills is throwing in the towel on offshore wind power, as Dutch officials have determined the Netherlands can no longer afford large-scale subsidies for expensive wind turbines that cannot produce electricity at economically competitive prices.

 The decision is a powerful blow against renewable power advocates who have long asserted Holland proves renewable power can be practical and economical.” - Dutch Pull the Plug on Offshore Wind Subsidies, Heartlander, D. Brady Nelson (2)

Setting aside one’s political views in regards to taxpayer subsidies and environmentalism, one must examine the situation of the two way cost where the taxpayer/consumer subsidizes his/her own price increase. That is to say, when green energy is subsidized by the taxpayer a first cost is incurred. However, the green energy firm which has already collected a taxpayer subsidy goes one step further and lobbies for their energy output to be purchased by utilities [purchase is mandated/required]. The utility is then forced to buy the supply of green energy output at above market green energy output price (other sources are available at lower costs but the utility’s freedom to choose inputs has been curtailed). The increased cost is then passed onto the consumer. Therefore the taxpayer/consumer has subsidized their own price increase.

Upon further review, the subsidization of one’s own price increase is not the end of the story as the value associated with the subsidization and consequential price increase purposely appear somewhere/elsewhere. That is to say, beyond tax dollars of taxpayer A being spent to increase the costs to the same taxpayer A when acting as a consumer, the taxpayer subsidy and increase cost accrues as a benefit to an exogenous party(s).  In other words, beyond the political dupery of having the taxpayer subsidize his/her own increased cost, the cost becomes a value to another party or parties.

Before one examines what party or parties benefit from the purposeful political dupery one needs to consider third party intervention. That is, the entire dupery process of the taxpayer subsidizing his/her own increased cost, such dupery cannot occur unless a third party directs such dupery. The third party dupery enabler is the politico.

Hence the politico-dupery-enabler with taxpayer dollars in hand [subsidy] and the mandated price increase in hand, bestows the value of the taxpayer subsidy and subsequent increased cost, the value thereof, on another party. This exogenous party that receives the value is a process known as dependent political constituency building through tax payer dollars. That is, the politico bestows the value by building a voting block constituency that is dependent on the politico funnelling now and in the future, the value items mentioned above. Stated alternatively, the values of the subsidy and the mandated purchase become the dollar conduit that allows the politico to build and subsequently rule the dependent political constituency.

Meanwhile, a final step needs examined once the politico is satisfied he/she has built a dependent politico constituency at no cost to themselves and with all cost borne by the taxpayer/consumer. The “winner” [picking winners and losers] is the party with the value bestowed upon them. This remote third party gains the value not through competition, not through innovation creating a low cost and valued item by the market place; the value was gained through politico enablers aka crony capitalism.

H/T: Carpe Diem and Mark Perry

Notes:

(1) http://www.project-syndicate.org/commentary/lomborg81/English


(2) http://news.heartland.org/newspaper-article/2011/12/30/dutch-pull-plug-offshore-wind-subsidies

"The state is the great fiction by which everybody seeks to live at the expense of everybody else." - Frederic Bastiat 1850

The Labor Market “Churn Rate”: The Seen and the Unseen.

“Job churning—the voluntary movement of workers from one job to another similar job—is an important but seldom noted factor in the labor market. Churning creates badly needed job opportunities when growth slows and unemployment rises.” (1)

In labor economics the observation above is referred to as the “churn rate”.  The churn rate is the measurement of the voluntary termination by the worker/employee (resignation) and re-employment of the same worker/employee by an alternate firm at a higher level of compensation. The higher level of compensation is considered to be an indicator of a better allocation of labor resources.

Why examine the labor market “churn rate”? One must endeavor to go beyond the seen, to the unseen. Recent improvements in the headline unemployment figures (the U3 measurement) and the decline in jobless claims are put forth by many pundits, talking heads, and media types as an indicator of a much improved economy and hence a much improved employment picture. However, another school of thought is that jobless claims is an overrated indicator especially with historically low labor participation rates, 5.4 million discouraged worker, and an SGS alternative unemployment rate standing at 22.5%. (2) (3) (4) (5)

　

FIGURES on employment tend to encourage a black-or-white view of an economy. Either conditions are worsening and firms are shedding workers, as they did by the hundreds of thousands in 2008 and 2009, or times are improving and businesses are creating new jobs. Spirits leapt on February 3rd on news that America’s private businesses boosted their payrolls by 257,000 jobs in January, capping the country’s best 12-month employment performance in the private sector for over five years. But the headline figures represent just the tip of a large labour-market iceberg. Data provided by the relatively new Jobs Openings and Labour Turnover Survey (JOLTS) illuminate these depths.

Even in the darkest of days, labour markets remain busy. Growing firms hire to expand and even shrinking businesses seek out workers to fill important vacant positions. In December 2008, for instance, overall American employment dropped by nearly 700,000 jobs. Yet in that month more workers—over 4.1m in total—were hired into new positions than in December of last year, when net payrolls grew by 203,000. During a relatively placid economic period like the mid-2000s, about 65% of all hiring is associated with what economists have dubbed “churn”—the job-to-job movement of workers through the labour force, which neither adds to nor subtracts from total employment. Of the 12m or so hires that occurred in a typical pre-recession quarter, some 8m came from firms luring workers away from other firms.

Churn is a mechanism by which labour markets reallocate workers towards more efficient ends. In the typical job-to-job move (that is, without any intervening stint of unemployment) an American worker can expect a rise in wages of over 8%. This gain represents, at least in part, an improvement in productivity. As workers obtain skills and find better job matches, their output and earnings rise. And as firms obtain ever more suitable labour, they can afford to pay higher wages. In this way, the churning of the labour market contributes to growth in the potential output of the economy. - The Economist, Go for the Churn, 02/11/2012


Link to the entire article appears below:

http://www.economist.com/node/21547224


Notes:

(1) http://www.incontext.indiana.edu/2009/jan-feb/article1.asp

(2) http://www.econlib.org/library/Bastiat/basEss1.html

(3) http://economics.about.com/od/unemploymentrate/f/labor_force.htm

(4) http://www.zerohedge.com/news/labor-force-participation-rate-drops-639-lowest-january-1984

(5) http://www.shadowstats.com/alternate_data/unemployment-charts

Friedman and Schwartz vs. Today’s Talking Heads: The 88 vs. The Gazillion

Talking heads, pundits, and media types speak/talk/write volumes-upon-volumes about the recent housing boom-bust and subsequent financial crisis. Specifically they commentate that the subsequent deep economic recession, shallow recovery, and subsequent economic malaise has a common thread of risk aversion and the quest for liquidity. They elude to, poke about, show charts and graphs, and otherwise attempt to explain in 100 gazillion words that risk adverse and liquidity is the revealed preference after a cataclysmic economic event.


Consider the following excerpt, specifically the eighty eight words within the following passage that concisely and compactly economize on the 100 gazillion plus words of today's talking heads, pundits, and media types:

“Partly, no doubt, the stock market crash was a symptom of the underlying forces making for a severe contraction in economic activity. But partly also, its occurrence must have helped to deepen the contraction. It changed the atmosphere within which businessmen and others were making their plans, and spread uncertainty where dazzling hopes of a new era had prevailed. It is commonly believed that it reduced the willingness of both consumers and business enterprises to spend ; (6) or, more precisely, that it decreased the amount they desired to spend on goods and services at any given levels of interest rates, prices, and income, which has, as its counterpart, that it increased the amount they wanted to add to their money balances. Such effects on desired flows were presumably accompanied by a corresponding effect on desired balance sheets, namely, a shift away from stocks and toward bonds, away from securities of all kinds and toward money holdings.” - Friedman and Schwartz, The Great Contraction 1929-1933, pp 10-11.



Note: the footnote referenced by Friedman and Schwartz appears below:

(6) See A. H. Hansen, Economic Stabilization in an Unbalanced World, Harcourt, Brace. 1932, pp. 111-112; J. A. Schumpeter. Business Cycles, McGraw-Hill 1939, Vol. II pp. 679-680; R. A. Gordon. Business Fluctuaions, Harper, 1952, pp. 377-379, 388; J. K. Gaibraith. The Great Crash, 1929, Boston. Houghton Mifflin, 1955, pp. 191-192. See also Federal Reserve Board, Annual Report for 1929, p. 12.

Choice, Limited Choice, and Not Choosing Limited Choice

If one is familiar with Milton Friedman one is likely familiar with his mantra of “free to choose”. You may well be familiar with his book and subsequent PBS series of the same title Free to Choose. (1) (2)

If one is -or- is not familiar with Milton Friedman, the following is an observation of one of his core views for the unfamiliar, and an excellent reference for the familiar:

“Friedman’s core view of economics and matters of economic policy was fully developed by the time he undertook the massive of his monetary history of the United States. Nevertheless, the events recounted in a key part of that work, his horror story of the Great Contraction , strengthen his convictions and formed much of the theme song he sang for the rest of his life. His viewpoint was remarkably simple, especially for an economist.

Freedom of decision, Friedman believed, was the necessary condition for the economic system to deliver the highest standard of living to the largest number of people. He was convinced that individuals as a group would make consistently better choices for themselves than bureaucrats who aimed to make decisions for those individuals. The Federal Reserve was just one government agency out of the many he would have preferred to see go out of existence or at least be relegated to just maintaining the money supply at a steady level.” - Peter L. Bernstein, Introduction, 2008 edition of The Great Contraction 1929-1933.

Its been restated many times that a free people, in a free market, free to choose among freely available choices, will make exchange at mutual self interest hence the pie expands. That fallacy exists based on zero sum thinking in that exchange is only a zero sum in that only one party gains at the expense of another party. The fallacy is exposed, in part, due to mutual exchange. If both parties do no perceive a gain, exchange will not occur.

"Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another."- Milton Friedman


One may find insight by considering/constrasting the opposite proposition of Friedman’s free to choose, which is those advocating limited choice:

(1) proponents of limited choice advocate limited choice as the advocates know that the many and several would never choose the limited choice.

(2) advocates of limited choice have in fact chosen the particular limited choice.


Utility, or satisfaction, varies among everyone. Some people derive grand satisfaction by traveling the world while others love to be homebodies. Some love the beach others love the mountains. In each instance the person is free to choose among alternatives that derive the greatest satisfaction for that particular individual in that particular individual’s real time circumstances.

Advocates of limited choice have chosen to limit choice among infinitely dynamically changing choices, of which, yield maximum utility for particular individuals in particular individual circumstances. By extension, individual utility or satisfaction has been thus limited. The “limit” is imposed by limited choice advocates as without the limit the limited choice advocates know that the many and several would never choose the limited choice as they would seek particular-instance maximum satisfaction by way of the many other choices which have now been preempted.

What criteria would one use if one were an advocate of limited choice? Among many “choices” the advocates of limited choice hang their hat upon is “society”. An immediate problem arises in that “society” is an abstract concept. Have you ever met society? Shook hands with “society”? Regarding the abstract concept of “society”, one finds infinitely dynamically changing choices in what society means to particular individuals in particular individual circumstances. Hence the only way “society” can be an argument for limited choice - is if “society” itself becomes an abstract concept of limited definition and meaning.

Note: is society the summation of all the individuals freely choosing -or- is society a top down concept of certain individuals with a pre-chosen vision of society and the now the once free to choose individual must surrenders free choice to fit the pre-chosen vision of certain individuals?

One can quickly see limited choice becomes the plans of the few superseding the plans of the many. That advocates of limited choice want a limit based upon their choices of how they perceive what a limited choice of what “society” should mean to all. (3)

That is, a certain group wants to be free to choose to limit another group’s choice. Choice is used to preempt choice.

　


Notes:

(1) http://www.amazon.com/Free-Choose-Statement-Milton-Friedman/dp/0156334607/ref=sr_1_3?s=books&ie=UTF8&qid=1329543856&sr=1-3

(2) http://miltonfriedman.blogspot.com/

(3) http://www.econlib.org/library/Essays/hykKnw1.html
　

　

Jobless Claims Decline But 5.4 Million Discourage Workers Remain

Regarding recent jobless claim declines in the US economy, and this as an indicator by some of an improvement of the aggregate economy…..what about the 5.4 million total discouraged workers (short-term discouraged and long-term discouraged = total discouraged)?

U6 unemployment measurement includes the short-term discouraged worker as well as other categories of workers and currently stands at 15%. Lets dust off the SGS alternate unemployment rate and bring it off the shelf (reflecting total discouraged) and one notes that it stands at 22.5%. (1)

Focusing on jobless claims and considering a three year trend regarding a declining-to-stagnant economy, jobless claims trended up, peaked, then trended down as firms removed marginal workers at the margin, then marginal workers more toward the core, ending with a firm made up of core workers. Hence with the firm running on core workers and the firm producing few new jobs:

(1) the now “core employment” doesn’t shrink,

(2) few new jobs created means fewer new jobs to be possibly eliminated,

(3) hence fewer jobless claims.

Keep this in mind for a moment.

　

During the same phenomena described directly above, the discouraged worker pool increased at an increasing rate. That is, some sub-set of jobless, having been a prior jobless claim statistic in month MM in year YY becomes long-term unemployed and eventually falls into the discourage worker pool.

We end with a core firm economy, and the core firm within this economy finds it can do more with less. The core firm economy, and its core firm employed, match the demand gap and hence a dynamic equilibrium. The end result is that at this point on the trend line the firm hires few and fires few.

One must consider that the  5.4 million discouraged are attracted back to the labor pool (become active job seekers) once the economy shows signs of improvement (flooding the denominator of the unemployment formula hence sending unemployment upward in a improving economy). Moreover, these 5.4 million can not make a jobless claim, all they can do is show up in the denominator. However, the denominator keeps suffering from statistical revisions [guesses/political guesses?] e.g. 1.2 million statistically eliminated January 2012.

The next observation is: are we at the core or are we at a false core? If government is still spending more than the revenue taken in, is the core false? For example, if government moved toward a balanced budget, government would need to shed workers. If government moved toward a balanced budget, some expenditures would end associated with the private sector, meaning the core economy to some degree shrinks in the short-run.

One must also consider there has to be a cost associated with the 5.4 million discouraged workers. Welfare, food stamps, Medicaid, state level social welfare programs, etc. certainly are costs associated with maintaining the standing army of 5.4 million discouraged. However, considering 5.4 million discouraged workers, where are the soup lines, where are the tent cities, where are the masses sleeping in the street? That means the costs enumerated above must come with some addition cost. That is, since we see no soup line/tent cities there must be some expenditure/cost by some exogenous provider that creates a buffer between what one sees and what one would expect to see with an army of 5.4 million discouraged workers.

One might conjecture that these costs come in the form of items such as living in mom’s basement; the return to the extended family; income diverted from the core employed to the discourage relative; grandparents liquidating wealth and giving the funds to the discourage extended family member, etc.. Consider this, how long or at what rate can this exogenous cost continue? The cost can not be absorbed infinitely. Does the ability to absorb the cost deteriorate and deteriorate at an increasing rate suddenly exposing soup lines/tent cities?

Hence is the media, talking heads and pundits overrating jobless claim declines as a positive indicator?

Notes:

(1)  
http://www.shadowstats.com/alternate_data/unemployment-charts


　

　

　

　

　

　

Consumer Financial Protection Bureau: Consuming Consumer-Taxpayer Dollars At the Consumers Benefit?

“GOP legislators have been howling for months now about the Consumer Financial Protection Bureau's ability to set its own budget (within a generous upper limit) and why that should concern U.S. taxpayers in a time of ballooning deficits. A congressional hearing this week only underscored the validity of their case.

CFPB chief Richard Cordray told a House Financial Services subcommittee that the bureau "only used $123 million" of its $498 million cap last year and expects to remain "considerably below" budget caps of $356 million and $448 million for 2012 and 2013, respectively. The bureau has already undergone two audits. Those documents, plus the bureau's "budget justification" and quarterly reports are all posted on consumerfinance.gov.

Mr. Cordray's testimony sounded convincing -- until the committee dug into the details. Rep. Randy Neugebauer noted that the bureau asked for some $96 million dollars last year in a single-page letter, with no spending justification -- something Mr. Cordray replied was allowed "by law." Rep. Michael Fitzpatrick pointed out that the 2012 fiscal year budget estimates $130 million for "services," with no more explanation, and gives little reason for hiring 400 employees. Rep. James Renacci asked why the bureau was spending $55 million to renovate its headquarters. Mr. Cordray had no reply, nor could he explain why the the bureau wants to hire 1,400 employees in total. Oh, and the agency offers consumer information in 191 languages.

The bottom line is that Mr. Cordray may be uncomfortable (or not) having to answer tough questions, but ultimately the legislature has little leverage over him. The CFPB chief sets his own budget, can only be fired by the president for extreme malfeasance and holds vast regulatory powers over wide swathes of the consumer financial industry. Expect the CFPB spending machine to keep rolling on.” - The CFPB Spending Machine, Mary Kissel, The Wall Street Journal’s Political Diary, 02/17/2012



　

Maxine Waters: Yet Another Reason Dale Carnegie’s Public Speaking Course Is Valuable

New Orwellian Frontiers: Mom’s Brown Bag Lunch vs. West Hoke Elementary School and the Lunch Police

‘A preschooler at West Hoke Elementary School ate three chicken nuggets for lunch Jan. 30 because the school told her the lunch her mother packed was not nutritious.

The girl’s turkey and cheese sandwich, banana, potato chips, and apple juice did not meet U.S. Department of Agriculture guidelines, according to the interpretation of the person who was inspecting all lunch boxes in the More at Four classroom that day.

The Division of Child Development and Early Education at the Department of Health and Human Services requires all lunches served in pre-kindergarten programs - including in-home day care centers - to meet USDA guidelines. That means lunches must consist of one serving of meat, one serving of milk, one serving of grain, and two servings of fruit or vegetables, even if the lunches are brought from home.

When home-packed lunches do not include all of the required items, child care providers must supplement them with the missing ones.’


‘ "What got me so mad is, number one, don't tell my kid I'm not packing her lunch box properly," the girl's mother told CJ. "I pack her lunchbox according to what she eats. It always consists of a fruit. It never consists of a vegetable. She eats vegetables at home because I have to watch her because she doesn't really care for vegetables."

When the girl came home with her lunch untouched, her mother wanted to know what she ate instead. Three chicken nuggets, the girl answered. Everything else on her cafeteria tray went to waste.

"She came home with her whole sandwich I had packed, because she chose to eat the nuggets on the lunch tray, because they put it in front of her," her mother said. "You're telling a 4-year-old. 'oh. your lunch isn't right,' and she's thinking there's something wrong with her food." ‘ - Preschooler’s Homemade Lunch Replaced with Cafeteria “Nuggets”, Carolina Journal Online, Sara Burrows,
02/14/2012

Link to the entire article appears below:

http://www.carolinajournal.com/exclusives/homemade-lunch-replaced-with-cafeteria-nuggets.html


　

Keith Hennessey of Stanford University Explains Ratio Gimmicks in the President’s 2013 Budget.

“The Obama Administration claims their new budget contains $2.50 of spending cuts for every $1 of tax increases. Here is White House Chief of Staff and former Budget Director Jack Lew on Meet the Press yesterday:

'We’ve seen from Republicans in–particularly Republicans in the House, but with Republicans generally, that they don’t want to be part of any plan that raises taxes at all. The president’s budget has $1 of revenue for every $2 1/2 of spending cuts. This can be done, but it can only be done when we work together.'


Their 2.5:1 ratio is bogus. The President’s team is (1) playing a timeframe game and (2) counting interest savings from tax increases as spending cuts.

Contrary to Mr. Lew’s assertion, the President is proposing at least $1.20 of tax increases for every dollar of proposed spending cuts. The President’s budget locks in historically high spending levels and relies more on tax increases than spending cuts for the limited deficit reduction it proposes.

Table S-3 from the newly released President’s Budget starts measuring deficit reduction a year ago, in January 2011. The table shows $5.3 T of deficit reduction over the next ten years resulting from a combination of laws enacted last year and the President’s new proposals released in today’s budget.

The President’s budget is a set of policy proposals for the future. When most people hear the “The President’s budget has $1 of revenue for every $2 1/2 of spending cuts,” they think this ratio applies to the changes the President proposes for the future.

I will therefore split the OMB table and recalculate this ratio, ignoring spending cuts and tax increases that have already been enacted into law and looking only at future policy proposals. I argue this is the right way to do this ratio. Like the OMB table, this one shows deficit reduction for the next 10 years ($ in billions, 2013-2021).

	Already enacted	New proposals	Total
spending cuts	1720	1254	2974
tax increases		1510	1510
interest effects			800
total deficit reduction	1720	2764	5284
spending / taxes		0.83	2.50
taxes / spending		1.20

Looking only at new proposals, the President’s budget proposes 83 cents in spending cuts for each dollar it proposes in tax increases. Or we could say the President’s budget proposes $1.20 in tax increases for each dollar in proposed spending cuts.

The gimmicks

The President’s team is playing at least two games to generate their 2.5:1 ratio:


They are cherry-picking their timeframe to make the ratio look at high as possible;
-and-
They are counting all interest savings as spending cuts.
　
Why did they start measuring in January 2011? Because that was the start of the Republican Congress, because last year only spending cuts were enacted, and because that timeframe maximizes the spending increase to tax cut ratio.” - Keith Hennessey, 02/13/2012


The entire essay, The ratio of spending cuts to tax increases in the President’s budget, appears in the link below:


http://keithhennessey.com/2012/02/13/bad-ratio/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeithHennessey+%28Keith+Hennessey%3A+Your+guide+to+American+economic+policy%29

SGS Alternate Unemployment Rate (the measurement you rarely see)

The headline unemployment rate is the U3 measurement which current stands between 8-9%. U3 is argued by many as a political unemployment rate in that the measurement has become an unreliable measurement due to arbitrary adjustments.

U6, also known as the real unemployment rate, stands at 15%. Many people suggest that U6 is a better measurement of unemployment as it includes short-term discouraged workers, marginally-attached workers, and those workers which work part-time as full-time employment is unavailable.

However, in the current economic situation, if one is faced with 5.4 million discouraged workers, an army of discouraged workers, made up of short-term and long-term discouraged, one surely has to consider this standing army of discouraged workers. (1)

Enter the SGS alternate unemployment rate which adds in the long-term discouraged worker. We then find a measured rate of roughly 22.5%. (2)

　

Notes:

(1) http://www.headlightllc.com/avalanchebrief1/

(2)
http://www.shadowstats.com/alternate_data/unemployment-charts

2013 Obama Budget Accounting Vignette: post cards from the alternate universe of accounting -or- when deficit reduction means spending increase.

Around the World on $69 Million in Welfare Funds!

Nitwitery warning: when public sector unions can’t agree on dividing up the spoils

One might be well served to examine the "both sides of the table" phenomena when considering unionized public sector collective bargaining regarding a government monopoly. What is the "both sides of the table" phenomena?

　

(1) if bureaucrat X is negotiating with collective bargaining public sector union Y, exactly what motivation does bureaucrat X have regarding negotiations? The problem goes back to Milton Friedman's fourth category of spending: other people (bureaucrat X), spending other people's money (tax payers money), on other people (recipient class which in this case is a public sector union). Therefore the bureaucrat has little motivation because he/she is spending other people's money not his/her own money,

　

(2) public sector unions have found that they can collect dues through members and funnel dues into political action funds. They then fund the campaigns of politicos that promise them [public sector unions] more compensation. They not only fund certain politicos but actively encourage their union members to campaign for the politico. Once they get their particular candidate elected they have now secured a politico who over sees bureaucrat X.

　

The monopoly [government] through pricing power influence will pass on increased labor compensation costs, the goal/end product of the both sides of the table phenomena, to the end user. In the realm of government, monopoly price is tax and tax is increased to the end user which is the taxpayer aka YOU.

　

Therefore, unionized collective bargaining in the public sector is a collective bargaining scheme against the taxpayer. The collective bargaining scheme has no incentive to reduce costs as cost can be merely passed onto the end user. Moreover, the collective bargaining scheme, in a government monopoly setting, actually has incentives to pass on larger and larger price increases to the end user in the form of price influence and in this case tax increases. Lastly, the end user, the taxpayer aka YOU is not represented at the negotiating table due to the "both sides of the table" phenomena.

　

What happens if the “both sides of the table” phenomena morphs into a tax increase proposal before the spoils are determined? That is, rather than hashing out an agreement regarding pay/benefit increases through public sector collective union bargaining via the both sides of the table phenomena and then the new cost passed on as a tax increase…. what if the tax is proposed first representing specific spoils for certain groups that otherwise would be sitting at the table, the magical table known as the “both sides of the table phenomena“?

Oddly enough the differing collective bargaining public sector unions suddenly feel as if the procedure has aspects of picking winners and losers. That is, if a proposed tax increase, the proceeds thereof, are purposely bestowed upon certain attendees of the “both sides of the table” phenomena yet other seats at the table receive no proceeds, suddenly the collective bargaining public sector unions feel they are being targeted as winners/losers? Odd to say the least as the loser is the taxpayer but the taxpayer is completely out of the picture as the focus is on dividing up the spoils.

And now for a lovely story of spoils:

　

　

　
“California Gov. Jerry Brown likes to proclaim the virtues of democracy. But when it comes to ballot initiatives, the Democrat would rather voters have only one choice: Jerry Brown's.

　

　
Mr. Brown last year proposed a ballot initiative that would "temporarily" raise the state sales tax by half percentage point and income taxes on those earning more than $250,000 by one percentage point, to 10.3%. Individuals with more than $500,000 in income would pay a top rate of 11.3%. The governor has earmarked most of the projected $7 billion or so in additional revenue for K-12 schools, which explains why the California Teachers Association has thrown its support behind him.

The California Nurses Association, however, isn't set to get a cut of the revenue and is miffed. After all, the CNA helped to bankroll the labor campaign against Republican gubernatorial candidate Meg Whitman in 2010. The California Federation of Teachers (not to be confused with the much larger California Teachers Association) is also none too pleased because the governor's proposal doesn't set aside much money for public colleges, which the CFT represents. They also don't like that the initiative's sales tax component would hit poor and middle income members. The CFT and nurses' union thus are partnering to promote their own tax initiative, which would raise rates on millionaires by 3% and those earning more than $2 million by 5%. Their ballot measure would reserve a quarter of new revenues for public colleges and a quarter for children and senior services (e.g., health care). K-12 schools would get about a third.

Complicating matters further is the wealthy civil rights attorney Molly Munger who doesn't trust that either initiative will send enough money back to the classrooms. So she's financing a ballot measure that would raise rates on all earners, be indexed progressively, and mandate that all new revenues be spent in the classroom -- not on administration or increased benefits and salaries. Polls, however, show little public support for broad-based income-tax hikes, and the unions are loathe to support any measure that could limit future pay and benefit increases.

Mr. Brown has been urging Ms. Munger and the unions to suspend their initiative campaigns because he fears that the multiplicity of tax initiatives might kill Democrats' shot at getting any passed. In the past voters have reacted to competing initiatives, such as the five tax measures on the 2006 ballot, by knocking them all down. However, Ms. Munger isn't backing down and the other two unions think Mr. Brown should be the one to call it quits. The nurses and CFT were out en force at last weekend's California Democratic Party convention pitching their "millionaires' tax" to the party's rank and file.

The fact that the governor can't rally Democrats around his tax initiative is a testament to just how little political capital he holds and how much the public unions control the party. Even so, divisions among the public unions over how taxpayer dollars should be spent are emerging and threatening to undermine the solidarity that has made them so formidable. Perhaps they, too, are finally realizing that there's only so much money to go around.”

-- Allysia Finley, California's Competing Ballot Initiatives, Political Diary, The Wall Street Journal, 02/14/2012

“Free Contraceptive”: Upon Further Review the “free contraceptive” problem is merely an indicator of base model failure.

A point that seems to be missed by talking heads, pundits, and media-types regarding the Catholic contraceptive issue is: this is one more episode in a series of endless episodes associated with a central planning scheme known as ObamaCare. Further, it is not Obamacare specifically, its any centrally planned scheme that by design continuously exhibits an endless series of negative episodes also known as unintended consequences.

The centrally planned scheme, as with any scheme, comes with endless tangents. Tangents of the unintended, that then interact into cascading unintended consequences.

When the unintended consequences surface one will most certainly note the classic central planning after-the-fact attempt to address unintended consequences by way of back tracking e.g.: ...oh we really meant this or that, ...oh that doesn't apply to YOU after all, ...oh we will waiver that aspect, and on and on and on it goes.

In the main, its not about Catholics, its not about contraceptives, its about a central planning scheme. Yet another scheme in a long parade of schemes based on "the way things ought to be". Scheme based propositions are never able to sort out the endless tangents.

Those gazillion tangents, that the central planners of the centrally planned scheme were suppose to take into account. Those experts with Omni-present knowledge, with grand supposed abilities, with continuous and dynamic real-time knowledge of each and every mundane aspect, that go onto design a socio-economic system…. with knowledge they do not in fact possess. (1)

Those tangents, which are so conveniently assured to never occur when central plans are sold based on a proposition of “the way things ought to be”. Those tangents that have absolutely no chance of being accounted for, but most assuredly were sold as accounted for when “the way things ought to be“ was a warm and fuzzy politico info-mercial. Yes, those many, varied, and consequential tangents go on to tarry at their haunt and re-visit time and time again.

One needs to consider being ahead of the curve regarding the following propositional arguments that surely will surface regarding the endless tangents of the scheme as it unravels and reveals its many and varied errors: (a) if the plan had been different, (b) if the planners had been different, (c) if circumstances had been different, (d) if we would have had more money, (e) if all of the above, a combination thereof, had been different.

Do centrally planned schemes by “experts” through the use of coercive powers, armed at best with non-real time general knowledge….do such schemes historically sort through items resulting in wonderful outcomes? -Or- do free market based, free people, free people basing decisions on real time mundane knowledge, making free decisions at the point of mutual self interest historically result in the best overall outcome?

Notes:
(1) F.A. Hayek, from the essay The Pretense of Knowledge

Justification of equality: equalitarian ends by unequalitarian means? Great inequality in the right to decide such issues and choose such means?

If one is concerned with equality, then one should also be very, very concerned with equality of power.

Would the power to create equality require inequality of power? Equality is achieved via inequality? Would it be that those with a zest for equality fail to see the inequality of means to achieve such equality? -Or- are those with a zest for equality, in essence, merely transposing inequalities?

　

“The two visions entail very different views of the relationship between members of the existing society. The unconstrained vision has tended historically toward creating more equalized economic and social conditions in society, even if the means chosen imply great inequality in the right to decide such issues and choose such means. Clearly, only very unequal intellectual and moral standing could justify having equality imposed, whether the people want it or not, as Dworkin suggests, and only very unequal power would make it possible. It is consistent for the unconstrained vision to promote equalitarian ends by unequalitarian means, given the great difference between those whom Mill called “wisest and best” and those that have not yet reached that intellectual and moral level.

Conversely, those with the constrained vision have tended to be less concerned with promoting economic and social equality, but more concerned with the dangers of an inequality of power, producing and articulate ruling elite of rationalists. In Hayek’s words:

The most dangerous state in the growth of civilization may well be that in which man has come to regard all these beliefs as superstitions and refuses to accept or to submit to anything which he does not rationally understand. The rationalist whose reason is not sufficient to teach him those limitations of the power of conscious reason, and who despises all the institutions and customs which have not been consciously designed, would thus become the destroyer of the civilization built upon them.” (1) (2)


Which then leads to this observation :


“This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims.” - F.A. Hayek, from the essay The Pretense of Knowledge


Which lends itself to this observation:

　

[Paraphrasing] In a consciously planned economy equality of income becomes an income redistribution scheme. Once the centrally planned economy fails, the justification for the continuation of the centrally planned economy becomes equality of income. -Thomas Sowell


Notes:

(1) Thomas Sowell, A Conflict of Visions: Ideological Origins of Political Struggles, 2007 edition, page 55.

(2) F.A. Hayek, The Counter-Revolution of Science: Studies on the Abuses of Reason, 1979, pp, 162-163